Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 282: Social divisions and institutions: Assessing institutional parameter variation

Ann-Sofie Isaksson ()
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Ann-Sofie Isaksson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: This paper investigates the hypothesis that the association between property rights institutions and income is weaker in countries with high social divisions. It argues that social divisions should have a negative effect on perceived institutional inclusiveness, which in turn should depress institutional payoffs. Absent a property rights indicator that captures the perceived inclusiveness of institutions, social divisions should then weaken the observed association between property rights institutions and income. The empirical results support this hypothesis, and highlight the importance of evaluating whether the institutions measure used captures the institutional framework applying to the population at large.

Keywords: Property rights institutions; social divisions; parameter heterogeneity

JEL-codes: O10; O17; P14; P26

27 pages, First version: February 1, 2008. Revised: January 24, 2011. Earlier revisions: August 1, 2008, May 1, 2009.

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